James Hacking Hides Illegal Pay Raises

The Public Safety Personnel Retirement System’s Administrator, James Hacking, appears to have authorized illegal raises for investment department employees and withheld the existence of the raises from the Arizona Department of Administration, as reported by the Arizona Republic.

Pension trust admits giving staff illegal raises

Story Highlights

PSPRS refuses to say who received raises and how much public money was spent

Gov. Jan Brewer expresses outrage and says she will seek reforms

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Public Safety Personnel Retirement System Administrator Jim Hacking acknowledged late Tuesday that the pension trust awarded pay raises to his staff without state approval — a violation of Gov. Jan Brewer’s personnel reform law pushed through in 2012.Hacking refused to say who received illegal raises, how much was paid or when the raises took effect. The information is supposed to be subject to state public-record laws.The Arizona Department of Administration began investigating the raises after a contract employee’s pay increase was questioned by The Arizona Republic last week for a news story published Monday. It remains unclear if illegal raises can be rescinded or whether the money can be recouped.–RELATED: PSPRS gives raise, bonus to executive who made sexual remarks–RELATED: Agency expands probe of public safety pension system–Read more at pensions.azcentral.com-Trust Chairman Brian Tobin, a Phoenix Fire Department assistant chief, did not return a call seeking comment. Brewer, however, expressed outrage through a spokesman.”Gov. Brewer doesn’t tolerate state officials turning a blind eye to their statutory responsibility,” said Andrew Wilder, her spokesman. “The governor wants immediate action to correct the situation and will examine additional reforms that would ensure further transparency and accountability for taxpayers.”Asked if the governor would seek Hacking’s removal or reappoint Tobin, whose appointment has expired, Wilder said, “We are exploring all options.”The raises are the latest problem for the trust, which is under a state workplace-violation investigation and a federal criminal probe. The $7.9 billion trust provides retirement benefits for Arizona police officers, firefighters, elected officials and prison guards.

Hacking, administrator since 2005, received approval in November from a divided seven-member board — all Brewer appointees — to give raises of up to 27 percent to five investment staff employees.

However, Brewer pushed through a change in the law in 2012 that requires the ADOA to authorize raises for any state employees not subject to employment contracts.

State Administration Director Brian McNeil has declined since late last year to approve any PSPRS raises because his agency is conducting an ongoing investigation into allegations of sexual harassment and workplace violations at the pension fund.

McNeil also is awaiting the findings of an FBI criminal investigation into the pension system, launched after ex-employees alleged that PSPRS used inflated real-estate values in annual reports to enhance staff bonuses.

“The (pension) system never obtained the needed approval by Arizona Department of Administration. This was a mistake. We are now working with ADOA to rectify the situation and implement a protocol to ensure that no such mistake occurs in the future,” Hacking said in a statement. He would not answer other questions.

McNeil also declined comment.

The ADOA began an investigation last week into whether PSPRS had granted secret raises. It came after The Republic raised questions about a 13 percent pay raise and a $60,000 bonus that Hacking gave to Martin Anderson, a PSPRS executive who had admitted making sexual remarks to a female subordinate.

Trust spokesman Steve Meissner told The Republic in writing on Thursday that “ADOA-approved salaries were put into effect” for other staff members as well.

The Republic asked the ADOA about Meissner’s comment. Jeff Grant, an ADOA spokesman, said the agency never granted the raises. McNeil then began an investigation.

McNeil and Hacking met privately Monday. Late Tuesday, in answer to additional questions from The Republic, Hacking admitted the other raises were inappropriately given.

The ADOA would not release PSPRS pay records it obtained for its investigation.

Hacking sought the raises last year to replace a controversial bonus program and to compensate shrinking investment staff for additional work they took on following the resignations of four employees.

Three investment analysts and the in-house counsel quit in protest last year amid allegations that the trust used inflated real-estate values to bolster its financial reports. Hacking has denied the allegations and has blamed the criminal probe on disgruntled employees.

The board suspended bonuses last September after TheRepublic disclosed in August that PSPRS gave its highest-paid staff members bonuses and guaranteed raises the prior five years even though the trust posted financial losses in 2008, 2009 and 2012. The fund required additional tax dollars to stabilize.

The ADOA began its workplace investigation of PSPRS this spring after receiving retaliation complaints from former employees. The inquiry later expanded to include allegations of sexual harassment.

The trust’s board did its own investigation last year after staff complained of being “punished for disagreeing with management” on numerous issues. The pension system paid Lewis and Roca, a Phoenix law firm, $124,133 to do the inquiry. The trust has refused to release to the ADOA the findings of that investigation. It also has refused The Republic’s request to examine the documents under the Arizona Public Records Law, citing attorney-client privilege.

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PSPRS gives raise, bonus to executive who made sexual remarks

Craig Harris, The Republic | azcentral.com July 7, 2014

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Pensioners First – According to the Republic, Arizona PSPRS’ Deputy Chief Investment Officer Marty Anderson made sexual remarks to a female employee he supervised. Deputy CIO Anderson told her to “sit on the copy machine.” Anderson was subsequently awarded a $60,000 bonus and a 13% pay raise bringing his annual salary up to $208,000.

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Story Highlights

A PSPRS exec got a 13 percent raise and a $60,000 bonus despite being disciplined for sexual remarks.

Emotionally distraught victim of comment was fired early this year by PSPRS.

The FBI has interviewed the victim as part of its probe of PSPRS.

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The Public Safety Personnel Retirement System this year fired an emotionally distraught employee who had been subjected to sexual remarks by her boss, then gave bonuses, a pay raise and a three-year contract extension to the executive who made those remarks, records obtained by The Arizona Republic show.A PSPRS internal investigation confirmed that the “extremely offensive” sexual comments were made during an April 25, 2012, staff meeting. Recent court filings in an unrelated case say the woman, whose name The Republic is withholding, was told the supervisor who made the comments, Martin Anderson, would be “reprimanded and punished,” but that nothing happened.MORE: Complete coverage of pensionsCourt records indicate the woman spoke to FBI agents, who are investigating whether the pension system used inflated real-estate valuations in its financial statements. She was a member of an investment team knowledgeable about financial information in that case.PSPRS records show that Anderson, deputy chief investment officer, acknowledged in a signed statement shortly after the incident that he made “extremely ill-considered and offensive” sexual remarks. He was given an unsatisfactory performance rating after the incident, and his bonus was cut.However, records released byPSPRS on Thursday show Anderson was given a $60,000 retention bonus this year and a 13 percent raise on June 1, bringing his base annual compensation to $208,000. His contract also was extended.Anderson could not be reached for comment.Jim Hacking, PSPRS administrator, approved An­derson’s contract extension June 1. It calls for guaranteed inflation pay raises and another retention bonus of $69,000 in 2017.

Hacking did not respond to questions about the matter. Brian Tobin, PSPRS chairman, did not return a call seeking comment.

The recent court filings offer a glimpse into the internal discord that beset the embattled $7.9 billion state trust fund, which provides retirement benefits for Arizona police officers, firefighters, elected officials and prison guards. The trust is under a federal criminal investigation, as well as a state workplace and sexual-harassment inquiry.

After the 2012 comments, problems at PSPRS escalated. Last year, three senior-level investment staff members and the in-house legal counsel quit during an internal dispute over whether the values of trust real-estate holdings were inflated to trigger bo­nuses.

That eventually prompted a federal investigation, including a grand jury’s request to review internal PSPRS documents. The Republic has learned federal agents have interviewed at least four ex-PSPRS employees, including the woman who was fired.

An FBI spokesman said the PSPRS investigation is on­going.

Hacking has blamed the inquiry on disgruntled former employees.

The woman in question was a senior contracts specialist. Like those who quit, shepreviously had good performance reviews, PSPRS records show. She continued to work after the 2012 episode but was terminated Feb. 25 of this year.

PSPRS, in a written statement, said the circumstances surrounding her separation are private and confidential.

Documents filed in Maricopa County Superior Court say the woman perceived that the pension trust “allowed other employees to actively emotionally harass her” and she “did not feel safe at work.” The woman was seeking treatment for emotional distress when she was “terminated during her disability,” her psychologist wrote.

The woman is now being treated for several maladies, according to court records. Her lawyer declined comment.

In April, the Arizona Department of Administration acknowledged that it had expanded its investigation of workplace violations at PSPRS to include sexual harassment. The state has not disclosed who that inquiry is related to. Brian McNeil, ADOA director, did not respond to questions about the case.

The woman’s situation is detailed in filings in a civil case in which the trust sued Anton Orlich, a former senior portfolio manager accused of taking internal PSPRS documents as part of the dispute over asset valuations. Orlich, a whistle-blower who has been interviewed numerous times by the FBI, said he had permission to take the records. That civil case is ongoing.

The woman filed a motion in Orlich’s case asking to keep PSPRS from deposing her. The filing said she was unable to comply because she suffers from post-traumatic stress disorder and other emotional issues. The woman was not deposed.

Her psychologist statedin court records that the woman had an emotional condition that was “triggered by stress and admitted sexual harassment experienced during her employment.”

Records previously obtained by The Republic show the sexual comments were made during an investment-team meeting at PSPRS headquarters in Phoenix. A PSPRS investigation found Anderson said in front of the team that the woman could improve her “paper currency” by having her “sit on the copy machine.”

Anderson was chief of staff at the time. He supervised the woman and the investment team. A trust investigation determined the comments were “insensitive,” had “sexual overtones” and left no doubt that they were “justifiably offensive” to the woman. Anderson signed a document that confirmed the findings. About a month after the incident, records show, the woman acknowledged in writing that “PSPRS acted swiftly and appropriately in this matter” and that “actions taken are appropriate and sufficient to address the problem.”

The trust demoted Anderson as chief of staff, no longer allowed him to supervise the woman and said the incident would affect his bonus. For the fiscal year when the incident occurred, Anderson received the second-lowest performance rating among the nine-member investment staff. That rating lowered his 2012 bonus to $5,670.